The OECD’s Phase 3 Report on Implementing the OECD Anti-Bribery Convention in Australia (“Report”) was issued last month. It contains a clear warning to companies doing business in Australia that the OECD expects to see an increase in enforcement action by the Australian Federal Police (“AFP”) and for more use to be made of the corporate liability provisions of Australia’s anti-corruption laws.
The Report expresses a serious concern that the AFP has not been fully exploring all potential avenues for exercising jurisdiction in foreign bribery cases and addresses the issue of ensuring sufficient resources to prosecute foreign bribery cases. It also encourages the AFP to actively seek out foreign bribery allegations and engage in combined investigations by the Australian and foreign authorities.
Although the provisions of the Criminal Code Act 1995 (Cth) enable the prosecution of foreign bribery by Australian regulators, to date they have been rarely used for this purpose. This looks set to change.
Lack of enforcement
“The lead examiners are seriously concerned that Australia’s overall enforcement of the foreign bribery offence to date has been extremely low ” and “…that the AFP may not have been fully exploring all potential avenues for exercising jurisdiction in foreign bribery cases”. [emphasis added]
It has not escaped the OECD’s attention that the Securency case which began in July 2011 is Australia’s only foreign bribery prosecution to date. This low level of prosecution is concerning particularly when regard is had to the size of Australia’s economy and the number of Australian companies who are exposed to significant foreign bribery risks.
The Report suggests that the lack of enforcement is not for want of allegations with 28 allegations of foreign bribery involving Australian companies and individuals since 2005. The Report expresses a concern that cases have been terminated prematurely and without full investigation.
Recommendations made by the OECD for the AFP include:
- proactively seeking out foreign bribery allegations including use of the AFP’s international liaison network and Australian embassy officials who are well-positioned to identify foreign bribery allegations from overseas sources;
- proactively gathering information from a diverse range of sources at the pre-investigation stage to better inform investigations;
- taking steps to ensure that ASIC’s experience and expertise in investigating corporate economic crime are used to assist the AFP to prevent, detect and investigate foreign bribery where appropriate;
- taking steps to explore all avenues for exercising jurisdiction over related legal persons in foreign bribery cases;
- enhancing the use of the corporate liability provisions including those on corporate culture to deter instances of bribery;
- as a matter of policy and practice, systematically considering whether concurrent or joint investigations with foreign regulators are appropriate; and
- routinely considering investigations of foreign bribery-related charges such as money laundering and false accounting, particularly where substantive foreign bribery charges cannot be made out.
Australia’s Corruption Risk
“A significant portion of Australia’s international economic activities are exposed to risks of foreign bribery…. 75% of the top 100 companies … listed on the Australian Stock Exchange operate in a high risk sector, a high risk country, or both. Of particular note is Australia’s large mining and resource sector…. Australian companies in this sector have more projects in Africa than any other region in the world.”
“In 2010, [Australia’s] largest trading partner was China while India, Thailand, and Indonesia were also in the top ten…. Australia also plays a significant economic role in many countries in Polynesia and the South Pacific that have serious corruption risks.”
It is clear that Australian companies operate in many high risk jurisdictions and industry areas. What is also apparent is that, despite this exposure, a number of Australian companies do not adequately manage such risk. As recognised by the Report there is also “substantial confusion” surrounding the scope and operation of Australia’s facilitation payments defence. This is notwithstanding a perception that there is a prevalent practice of Australian companies making facilitation payments, particularly in the Asia-Pacific region.
With the OECD’s expectations of increased prosecutions and an enhanced use of Australia’s corporate liability provisions, the lack of knowledge and management of bribery and corruption risks is something that corporations can no longer ignore.
Time is ticking
By October 2013, Australia is required to make an oral follow-up report on its implementation of certain recommendations and must submit a written report on the implementation of all recommendations by October 2014. In addition, as noted in the Report, the offence of foreign bribery is becoming a priority for the Australian government with the National Anti-Corruption Plan, which aims to create a “whole-of-government approach” to corruption, due to be adopted next month.
Australian corporates can expect to see some swift changes in this area, in particular, in relation to enforcement action and the utilisation of Australia’s corporate liability provisions. The Report may also provide the impetus for the Australian government to repeal Australia’s facilitation payments defence.
The warning is clear.